June Gold: Buyers Defending $1908.10 – $1897.70 RT Zone

Gold futures are trading lower late in the session on Monday, hitting their worst level since February 25, as some bullish traders threw in the towel instead of fighting the Federal Reserve. The Fed is widely expected to be aggressive at next week’s May 3-4 meeting with traders pricing in a 50-basis point rate hike. Furthermore, policymakers are also expected to follow-up with similar rate hikes in June and July.

At 18:05 GMT, June Comex gold futures are trading $1897.40, down $36.90 or -1.91%. The SPDR Gold Shares ETF (GLD) is at $177.06, down $3.23 or -1.79%.

Although Treasury yields were down on Monday because of safe-haven buying of U.S. government debt, the U.S. Dollar still climbed because investors sought protection in the greenback due to weaker global equity markets and the shedding of riskier assets.

This also weighed on dollar-denominated gold because it reduced demand from foreign buyers.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down earlier in the session when sellers took out the previous main bottom at $1916.20. It was reaffirmed later in the day when the next main bottom at $1893.20 was violated. A trade through $2003.00 will change the main trend to up.

The market is currently trading on the weak side of a pair of retracement zones including $1897.70 – $1932.90 and $1908.10 – $1958.70. The two areas combine to form an important resistance cluster at $1897.70 to $1908.10.

Daily Swing Chart Technical Forecast

Trader reaction to the resistance cluster at $1897.70 to $1908.10 will determine the direction of the June Comex gold market into the close on Monday.

Bearish Scenario

A sustained move under $1897.70 will indicate the presence of sellers. Taking out the intraday low at $1891.80 will indicate the selling pressure is getting stronger. This could trigger a breakdown under $1882.00, putting the market in a position to accelerate to the downside.

Bullish Scenario

A sustained move over $1908.10 will signal the return of late session buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at $1932.90 to $1934.30. Since the main trend is down, sellers are likely to re-emerge to stop the short-covering rally.

I don’t think we have to worry about gold turning near-term bullish unless there is a close over $1934.30.